Google Under Fire: Could the Tech Giant Be Forced to Break Up?
The U.S. Department of Justice has petitioned a federal judge to force Google to sell part of its business. If approved, this could become a historic precedent in the U.S., reminiscent of the 1984 antitrust breakup of AT&T, potentially leading to the dismantling of a global tech giant.
On August 5, 2024, U.S. Federal Judge Amit Mehta ruled in favor of the Department of Justice, finding that Google (parent company Alphabet) had monopolized the search market through exclusive deals. In short, the U.S. court officially recognized Google as a monopoly.
The decision followed a 10-week trial in 2023.
During the investigation, it was uncovered that in 2022, Google paid around $26 billion to companies like Apple, Samsung, and others to secure its position as the default search engine on their web browsers and mobile devices.
By being set as the default, Google can improve its targeted advertising, as it gains access to user behavior and preferences.
Itâs a scenario many are familiar withâdiscussing a vacation over lunch and then seeing ads for travel agencies appear on your device soon after.
Search advertising, especially through these default agreements, has been the primary driver of Googleâs over $300 billion annual revenue.
What Is the DOJ After?
The 286-page ruling by Judge Amit Mehta focuses on Googleâs violations of antitrust laws and the courtâs concerns over its dominant market position.
The fact that Google holds a monopoly is undisputedâmarket statistics speak for themselves. According to StatCounter, Googleâs current market share in the U.S. ranges from 76% on desktops to 97% on mobile devices.
In 2024, Googleâs market share did decrease slightly, mostly to the benefit of Microsoftâs Bing, which rose to 13%. Other players like Yahoo (4%) and DuckDuckGo (around 2%, appealing to privacy-conscious users) follow behind.
Legally, the case focused on whether Google unfairly abused its monopolistic position. Judge Mehta determined that Googleâs distribution agreements blocked crucial access points, making it difficultâor even impossibleâfor other search engines to access the data needed to improve their products.
Outlined in a 32-page document, the recommendations propose various behavioral and structural remedies.
Among the behavioral measuresâwhich aim to regulate Google's data practicesâthe DOJ suggests ending the exclusive agreements that were central to the case, specifically Googleâs pre-installation as the default search engine on mobile devices and web browsers.
Other proposed remedies include regularly reminding users (through pop-up notifications) about the option to choose alternative search engines, as well as requiring Google to share more user data with competitors and implement other measures deemed necessary by the court.
However, as past cases have demonstrated, the mere availability of choice does not necessarily lead users to switch from Googleâs services. The court recognized that Google remains the top search engine in the U.S. due to its superior product quality, largely thanks to substantial ongoing investments.
Thus, the DOJ's recommendations include potential structural measures to prevent Google from using platforms like Chrome, Google Play Store, and Android to monopolize the search market and gain an unfair advantage in AI applications.
Given this, the court could potentially order the forced sale of one or more of these business units. The DOJ prefers structural solutions, such as a one-time sale, because it would eliminate the need for ongoing oversight and resources to monitor the effectiveness of any imposed measures.
However, this wouldnât solve the underlying issue and could introduce new opportunities for corruption.
This timeline gives all involved parties sufficient time to prepare their arguments and responses.
Googleâs Position
As expected, Google promptly responded to the courtâs ruling and announced its intention to appeal.
While the company does not dispute paying for the pre-installation of its search engine, it argues that such deals are standard in todayâs market. For instance, food companies pay stores for premium shelf space. Google emphasizes that competitors are always "just one click away," implying that users can easily switch to other services if they choose to.
As Lee-Anne Mulholland noted, forcing Google to share search queries, clicks, and results with competitors poses a significant risk to user privacy and security. She also warned that limiting Googleâs AI tools could hinder American innovation at a crucial time when AI business models are still being developed.
Itâs clear that Google is bracing for a long fight and will strongly resist any imposed limitations.
As noted by The New York Times, this court decision marks a significant milestone for Big Tech and is likely to set a precedent that could affect other government antitrust cases, including those targeting Apple, Amazon, and Meta (the parent company of Facebook, Instagram, and WhatsApp).
Wall Street: A Measured Response
Investorsâ reaction to the storm brewing over Google has been notably calm, even indifferent. Following the DOJ's recommendation for a potential forced breakup, Googleâs stock saw only a minor 2% drop.
This subdued response is partly due to the long timelines often associated with antitrust actions. For instance, the breakup of AT&T took a decade. The DOJ filed the case in 1974, and the court ruled in favor of the breakup in 1982, but the actual division didnât happen until 1984.
Furthermore, Google has faced numerous antitrust cases in both the U.S. and Europe over the years, and so these risks may already be priced into the stock. The same can be said for other major tech companies facing similar scrutiny. As a result, the reputational risks from the DOJ's proposals are likely already reflected in Google's stock price.
Googleâs stock has gained approximately 15% over the past year. In comparison, the average growth of the Magnificent Seven stocks (Alphabet, Apple, Microsoft, Amazon, Nvidia, Tesla, and Meta) has been around 21%, while the S&P 500 index rose by 20% in 2024.
This suggests that Wall Street has already priced in potential risks for Google and doesnât see any immediate threats to the companyâs short-term outlook. Additionally, the DOJâs final recommendations are still over a month away.
The decision followed a 10-week trial in 2023.
During the investigation, it was uncovered that in 2022, Google paid around $26 billion to companies like Apple, Samsung, and others to secure its position as the default search engine on their web browsers and mobile devices.
By being set as the default, Google can improve its targeted advertising, as it gains access to user behavior and preferences.
Itâs a scenario many are familiar withâdiscussing a vacation over lunch and then seeing ads for travel agencies appear on your device soon after.
Judge Amit Mehta Source: American Kahani
In practice, Google shares billions of dollars in ad revenue with these companies through distribution deals. While users can easily change the default search engine when setting up their devices, the majority stick with the preset option.
Search advertising, especially through these default agreements, has been the primary driver of Googleâs over $300 billion annual revenue.
What Is the DOJ After?
The 286-page ruling by Judge Amit Mehta focuses on Googleâs violations of antitrust laws and the courtâs concerns over its dominant market position.
The fact that Google holds a monopoly is undisputedâmarket statistics speak for themselves. According to StatCounter, Googleâs current market share in the U.S. ranges from 76% on desktops to 97% on mobile devices.
In 2024, Googleâs market share did decrease slightly, mostly to the benefit of Microsoftâs Bing, which rose to 13%. Other players like Yahoo (4%) and DuckDuckGo (around 2%, appealing to privacy-conscious users) follow behind.
Legally, the case focused on whether Google unfairly abused its monopolistic position. Judge Mehta determined that Googleâs distribution agreements blocked crucial access points, making it difficultâor even impossibleâfor other search engines to access the data needed to improve their products.
Courtroom sketch of Judge Amit Mehta Source: Wired
Now that Google has been found to have violated antitrust laws, the U.S. Department of Justice (DOJ) has submitted preliminary recommendations for potential remedies that Judge Amit Mehta could consider.
Outlined in a 32-page document, the recommendations propose various behavioral and structural remedies.
Among the behavioral measuresâwhich aim to regulate Google's data practicesâthe DOJ suggests ending the exclusive agreements that were central to the case, specifically Googleâs pre-installation as the default search engine on mobile devices and web browsers.
Other proposed remedies include regularly reminding users (through pop-up notifications) about the option to choose alternative search engines, as well as requiring Google to share more user data with competitors and implement other measures deemed necessary by the court.
However, as past cases have demonstrated, the mere availability of choice does not necessarily lead users to switch from Googleâs services. The court recognized that Google remains the top search engine in the U.S. due to its superior product quality, largely thanks to substantial ongoing investments.
Thus, the DOJ's recommendations include potential structural measures to prevent Google from using platforms like Chrome, Google Play Store, and Android to monopolize the search market and gain an unfair advantage in AI applications.
Given this, the court could potentially order the forced sale of one or more of these business units. The DOJ prefers structural solutions, such as a one-time sale, because it would eliminate the need for ongoing oversight and resources to monitor the effectiveness of any imposed measures.
The main challenge lies in determining exactly which parts of the company should be sold to effectively limit or dissolve Google's monopoly. Forcing the sale of Google Search alone, for instance, might simply result in another company dominating the market.
However, this wouldnât solve the underlying issue and could introduce new opportunities for corruption.
Is Google in Trouble? Source: Reuters
The DOJ is expected to present its final recommendations by November 20, 2024, while Judge Amit Mehta has scheduled a damages hearing for April 2025. The final decision in the case is expected nearly a year later, in August 2025.
This timeline gives all involved parties sufficient time to prepare their arguments and responses.
Googleâs Position
As expected, Google promptly responded to the courtâs ruling and announced its intention to appeal.
While the company does not dispute paying for the pre-installation of its search engine, it argues that such deals are standard in todayâs market. For instance, food companies pay stores for premium shelf space. Google emphasizes that competitors are always "just one click away," implying that users can easily switch to other services if they choose to.
We believe that todayâs blueprint goes well beyond the legal scope of the Courtâs decision about Search distribution contracts. Government overreach in a fast-moving industry may have negative unintended consequences for American innovation and Americaâs consumers. We look forward to making our arguments in court,said Lee-Anne Mulholland, Googleâs Vice President of Regulatory Affairs, in a blog post.
Mulholland further argued that the courtâs ruling seems to overreach the scope of the original lawsuit, which focused on search distribution contracts. She expressed concern that the DOJ is pursuing a risky agenda that could significantly weaken U.S. competitiveness.
As Lee-Anne Mulholland noted, forcing Google to share search queries, clicks, and results with competitors poses a significant risk to user privacy and security. She also warned that limiting Googleâs AI tools could hinder American innovation at a crucial time when AI business models are still being developed.
Google Headquarters Source: NYT
Google is particularly concerned that any requirement to sell off platforms like Chrome or Android could "break" them. The company emphasized that it has invested billions into making these platforms competitive and globally popular.
Few companies would have the ability or incentive to keep them open source, or to invest in them at the same level we do. Make no mistake: Breaking them off would change their business models, raise the cost of devices, and undermine Android and Google Play in their robust competition with Appleâs iPhone and App Store,Mulholland added.
Thanks to their open-source nature, both Android and Chrome are used by a broad range of industries, including automakers, fitness device manufacturers, laptop makers, and app developers. Any significant disruption to these platforms could have widespread effects, impacting the operations of many businesses and leading to a poorer user experience.
Itâs clear that Google is bracing for a long fight and will strongly resist any imposed limitations.
As noted by The New York Times, this court decision marks a significant milestone for Big Tech and is likely to set a precedent that could affect other government antitrust cases, including those targeting Apple, Amazon, and Meta (the parent company of Facebook, Instagram, and WhatsApp).
Wall Street: A Measured Response
Investorsâ reaction to the storm brewing over Google has been notably calm, even indifferent. Following the DOJ's recommendation for a potential forced breakup, Googleâs stock saw only a minor 2% drop.
This subdued response is partly due to the long timelines often associated with antitrust actions. For instance, the breakup of AT&T took a decade. The DOJ filed the case in 1974, and the court ruled in favor of the breakup in 1982, but the actual division didnât happen until 1984.
Furthermore, Google has faced numerous antitrust cases in both the U.S. and Europe over the years, and so these risks may already be priced into the stock. The same can be said for other major tech companies facing similar scrutiny. As a result, the reputational risks from the DOJ's proposals are likely already reflected in Google's stock price.
Google Stock: Not Thriving, But Stable Source: Yahoo Finance
There is another explanation for Wall Street's subdued reaction.
Googleâs stock has gained approximately 15% over the past year. In comparison, the average growth of the Magnificent Seven stocks (Alphabet, Apple, Microsoft, Amazon, Nvidia, Tesla, and Meta) has been around 21%, while the S&P 500 index rose by 20% in 2024.
This suggests that Wall Street has already priced in potential risks for Google and doesnât see any immediate threats to the companyâs short-term outlook. Additionally, the DOJâs final recommendations are still over a month away.
We think Googleâs valuation at the moment largely discounts most of regulatory risks but the market is looking for greater clarity before bidding the stock in one direction over another,said Angelo Zino, senior equity analyst at CFRA Research.
Furthermore, investors donât seem overly concerned that the antitrust measures will be too severe. Wall Street is betting that a radical breakup of Googleâs search business would be difficult to implement. Separating Googleâs complex and interconnected businesses would likely be a lengthy and painful process, so the court may opt for a more moderate resolution.
If regulators use a light touch on Google, it could act as a catalyst and help the companyâs stock multiple,Zino added.
